The new government has been criticised for its anti-landlord rhetoric and bias with new legislation and likely tax hikes in this month’s Budget that will cost renters dear.
Purplebricks chief executive, Sam Mitchell, criticised Labour’s anticipated capital gains tax (CGT) raid which could force landlords to pay thousands of pounds more on the sale of their properties, and believes that tenants and first-time buyers will in turn end up paying more for property.
Mitchell told The Telegraph that landlords will flee the private rented sector if chancellor Rachel Reeves presses ahead with anticipated tax hikes in the Budget later this month.
The Purplebricks boss said: “If you put capital gains tax up, you will have this rush of landlords selling up which is bad for tenants, puts rents up and makes it very difficult to become a first-time buyer.”
He added: “It’s almost impossible to save for a deposit if you’re a tenant that’s shelling out well over £1,000 a month on rent.”
According to Mitchell, the online estate agency has already seen a wave of landlords exiting the market ahead of the Budget on 30 October.
Reeves is said to be considering bringing CGT rate in line with income tax rates.
Currently, the maximum tax rate on profit from the sale of second homes is just 24%, compared to 45% for wages.
Mitchell pointed to the fact that “punitive” measures such as the removal of tax relief for mortgage interest and the introduction of a 3% stamp duty surcharge had already contributed to landlords selling up and rents spiralling.
“It seems to be very popular to bash landlords. The trouble is these policies bashing landlords end up hurting tenants because it just further reduces the supply of stock in the sector,” he said.
HMRC calculations show a 10% increase in the higher CGT rate could backfire and lose the Treasury £2bn in 2027-28.
Meanwhile, a single percentage point increase in the higher rate might pull in only £110m per year.
Mitchell said he was doubtful the policy would either increase supply for first-time buyers or raise funds for the Treasury.
“It won’t do either, I don’t think,” he said, adding this would “defeat the purpose” of raising the levy.
He added the government could consider introducing some form of tax relief for landlords that would also help first-time buyers.
“If they do put capital gains tax for buy-to-let investors, then why not look at more entrepreneurial schemes – for example, reducing that tax burden if you sell a property to your own tenant or a first-time buyer?
“That could be a virtuous circle of helping first-time buyers and not being too punitive to landlords as well.”
Tenants competing for fewer properties as landlords flee the rental market
